ACA and how things work out

[Gallaher]

Kind of a rant here.
Was forced to “retire” at 57 by big pharma after a 30 year career, mostly in management. Wifey and I are both 61 now.
I was 8 months short of retiree health benefits...when they told me to resign. Not to mention I was a top tier performer with two top of the Nation rankings in previous five years. Of course they knew I was soon to add to the cost bottom line with retiree benefits.
Current net worth is approaching 4 million. We could not have done that without Pharma, I’m thankful. However, the industry is pulling the wool over all of us. They spend more on marketing than R&D. I was glad to leave.

Anyway, I have never been a fan of socialized anything including healthcare. However, we needed insurance. We were able get onto ACA Bronze by keeping MAGI low. Our premium is $150 a month. Subsidy covers $1500 month. It’s kind of embarrassing.
Long story.
I needed ankle replacement surgery 11 years ago (yes they do that). Eventually, I wore the joint out and had to have another joint replacement. Total cost was $120K. My cost was $5K. Insurance covered the balance. I am very thankful.
Remember our net worth is $4 million. I don’t make the rules, just follow them.
The rules of the world are a mystery to me. We support several faith based charities as a way to give back.
Truly I was prepared to cover the surgery cost out of pocket. Maybe I should have. However, we paid lots of taxes along the way. So I don’t feel bad for exploiting the opportunity.

Just saying, if you are trying to FIRE, there are ways to afford quality healthcare.
I am posting this as a service to all. Glad I’m anonymous.

Forever thankful

 

[Dtail]

Many folks on this site including me take full advantage of managing MAGI for ACA tax subsidies and I for one have not one iota of guilt.

 

[ProspectiveBum]

If it makes you feel better, as a fellow taxpayer I am completely fine with your adherence to the current tax laws to procure reasonably-priced insurance. I’m hopeful that I’ll be able to do something similar in 8-12 years when I finally pull the plug.

I’m interested in your strategies to keep MAGI low. Did you just have a big pile of cash before you retired? Selling taxable up to a certain point (maybe to stay in the 0% CG bracket), and supplementing with cash?

Most of our retirement assets are in tax-deferred accounts, so I need to figure this out.

 

[Ramen]

There's nothing to feel guilty about anyway, IMO. It's how our system works, for better or worse. I'm on a good Silver ACA now but likely will have to go to Bronze next year if not expanded Medicaid because of low MAGI. No complaints and no guilt.

I’m interested in your strategies to keep MAGI low.

My strategy is frugality, keeping COL low.

 

[Dtail]

There's nothing to feel guilty about anyway, IMO. It's how our system works, for better or worse. I'm on a good Silver ACA now but likely will have to go to Bronze next year if not expanded Medicaid because of low MAGI. No complaints and no guilt.

No TIRA left to convert to a Roth?

 

[ProspectiveBum]

My strategy is frugality, keeping COL low.

Certainly, that’s a good strategy if it works for you. We live in a high COL area (which we love and have no interest in leaving). I also prefer steak to ramen. Our relatively large planned budget will require that we get creative on managing our MAGI until eligible for Medicare.

 

[Gallaher]

OP here
We have managed MAGI with a combination of:
* cash on hand when I retired
* Roth withdrawals
* sold a second home for cash. Had to declare capital gain for MAGI but not principle below capital gain.
* 401 k withdrawals
We are working on an annual budget of $120k with lots of fluff. Could get by on $80K.
Indecently, the ankle recover has been outstanding. Better than first joint replacement.

 

[MRG]

I have been taking advantage of this since I retired. I don't feel guilty. I didn't make the rules, no more than the rule that made me give KCMO 1% of my paycheck for 29 years and no way to vote against it. That was a lot of money.

I did feel guilty for a surgery that had to occur out of state, otherwise I would have been traveling a day each way and back for surgery and follow-ups. When I asked to have the same bill as insurance would have paid they suggested I apply for income based discount. Since magi was low they wrote the surgery off because we "looked poor". I didn't make the rules.

 

[O2Bfree]

DH and I manage our MAGI and pay $3.13/month for a silver plan. Much less than the $220/month I was paying for coverage while working. We feel a little guilty sometimes, but as he says it's not our fault they set it up that way.

A friend of mine who has a lot more money than we do pays nothing because his wife inherited a bunch of dough so they don't need to use any of their taxable income. What a scammer!

 

[RunningBum]

If it makes you feel better, as a fellow taxpayer I am completely fine with your adherence to the current tax laws to procure reasonably-priced insurance. I’m hopeful that I’ll be able to do something similar in 8-12 years when I finally pull the plug.

I’m interested in your strategies to keep MAGI low. Did you just have a big pile of cash before you retired? Selling taxable up to a certain point (maybe to stay in the 0% CG bracket), and supplementing with cash?

Most of our retirement assets are in tax-deferred accounts, so I need to figure this out.

I have the bulk of my assets in taxable,by virtue of employee stock options that soared rather than by plan. A key for me to keep my MAGI low was to use index funds/ETFs rather than managed funds. The later tend to have hard-to-predict CG distributions that can send you over the ACA cliff (if it comes back) in December, too late to recover from. International funds also seemed to have more distributions. I had to forego the subsidy in 2 of the 6 years of ACA to position myself for hopefully getting the subsidy in my last 6 years before Medicare. I sold off the funds that caused more taxable events and mostly put them in a CD ladder, which at the time was a wise move. Today, probably not so much.

You may or may not be able to make these kind of moves easily before retirement. I had no change at 0% LTCGs. And frankly, the managed fund I was in (VG Primecap) did so well that I probably did better staying invested in that, but I didn't know that at the time.

If most of your money is in tax-deferred, it's a lot harder because every $1 withdrawn for living expenses is $1 of taxable income.

 

[Aerides]

I'm quite happy with the ACA, and would be were it not subsidized. The law protects far more than the financials. For many prospective early retirees, the old option was keep working or have no insurance (or really crappy, or catastrophe only, and lifetime caps). Pre-existing conditions? hahaha stay on the payroll.

The fact that there are subsidies in place for lower income levels, all the better. We're on year 3 or 4 I think and have been happy with our coverage, doctors, choices, and prices. We've also used far more services in the past 3 years than we did before retiring, mostly due to age I guess.

 

[aaronc879]

I don't think multi-millionaires should be getting subsidies but the way the law is written it is allowed therefore no reason to feel guilty.

 

[Ramen]

No TIRA left to convert to a Roth?

There's some left. I just have a simple lifestyle and can cover my expenses with dividends, distros, occasional freelance work, and some redemptions. Definitely not a multimillionaire yet.

We live in a high COL area (which we love and have no interest in leaving). I also prefer steak to ramen.

Cool, more ramen for me.

 

[jimbee]

Kind of a rant here. Anyway, I have never been a fan of socialized anything including healthcare.

So I guess Medicare, Social Security, the local police dept., the local fire dept., and public roads are out of the question?

 

[Gallaher]

So I guess Medicare, Social Security, the local police dept., the local fire dept., and public roads are out of the question?

I pay for all of those:
Medicare and SS were deducted from 40+ years of payroll taxes. Police and Fire paid though property taxes. Still paying.
Where I live roads are paid for by a .60 a gallon fuel tax.
Taxes are not socialism

Facepalm!

 

[jimbee]

I pay for all of those:
Medicare and SS were deducted from 40+ years of payroll taxes. Police and Fire paid though property taxes. Still paying.
Where I live roads are paid for by a .60 a gallon fuel tax.
Taxes are not socialism

Facepalm!

I recommend you research how Medicare is funded.

 

[harllee]

I don't think anyone should feel guilty for taking ACA subsidies. The ACA is one of the best things that ever happened for early retirees. Years ago, DH and I retired early, got health insurance using Cobra and then applied to get private health insurance. I was approved for private health insurance but DH was not due to a preexisting health condition. There was no ACA then so DH had to go back to work to get health insurance when his Cobra ran out. A few years later the ACA was passed and DH was able to get ACA coverage and retire again. It was a great blessing to us. We were able to get a subsidy because we had low income and I did not feel guilty at all.

 

[dak2018]

Kind of a rant here.

I needed ankle replacement surgery 11 years ago (yes they do that). Eventually, I wore the joint out and had to have another joint replacement. Total cost was $120K. My cost was $5K. Insurance covered the balance.

I wonder if this quoted cost is the fake number that is only ever paid ( potentially) by cash patients? The medical industry is massively screwed up by this practice and it would not surprise me at all of the total exchange of dollars amounted to $20K or so.

FWIW - I am on the ACA and I manage my income to stay within the limits of the subsidies. No apologies on my part - just like the wealthy, I play by the rules. Unlike the wealthy, I do not lobby Congress to receive special carve outs in the tax code to facilitate my business practices. Guess we will just have to call it even.

 

[scrabbler1]

I don't think anyone should feel guilty for taking ACA subsidies. The ACA is one of the best things that ever happened for early retirees. Years ago, DH and I retired early, got health insurance using Cobra and then applied to get private health insurance. I was approved for private health insurance but DH was not due to a preexisting health condition. There was no ACA then so DH had to go back to work to get health insurance when his Cobra ran out. A few years later the ACA was passed and DH was able to get ACA coverage and retire again. It was a great blessing to us. We were able to get a subsidy because we had low income and I did not feel guilty at all.

The ACA was a godsend for me, too. Even with only a small subsidy in the first 3 years followed by no subsidy in the next 3 years, it was worth it. I retired in late 2008 at age 45 and was already on COBRA (which was reasonably priced and included dental) because I had reduced my weekly hours worked to 12 and became ineligible for group health coverage. I still had 2 months left on it when I ERed.

Then, starting in 2009, I bought an individual policy for a reasonable price to fit into my budget. However, the premiums went up nearly 50% in the next 2 years and was putting a strain on my budget, making me worried just how much I'd be paying for HI if those huge rate increases continued for another 17 years.

To counteract the high premiums, I changed to a bare-boned, hospital-only policy to get me from mid-2011 through the end of 2013. The ACA had already been passed by then, but I still had to wait until the start of 2014 until I could buy regular, more comprehensive policy, with or without a subsidy. I hoped I could stay healthy in that time, which I did, barely.

The Silver policy I bought in 2014 was cheaper than the one I bought in 2009, even without the small subsidy I qualified for. Rate increases varied over the years, and I did switch companies starting in 2016, after I had some health issues in 2015. Even without a subsidy, I'd be paying about the same I was paying in 2011 when I dumped the policy to make myself underinsured for a few years.

The subsidy train I have gotten onto again is icing on the ACA cake!

 

[chassis]

Kind of a rant here.
Was forced to “retire” at 57 by big pharma after a 30 year career, mostly in management. Wifey and I are both 61 now.
I was 8 months short of retiree health benefits...when they told me to resign. Not to mention I was a top tier performer with two top of the Nation rankings in previous five years. Of course they knew I was soon to add to the cost bottom line with retiree benefits.
Current net worth is approaching 4 million. We could not have done that without Pharma, I’m thankful. However, the industry is pulling the wool over all of us. They spend more on marketing than R&D. I was glad to leave.

Anyway, I have never been a fan of socialized anything including healthcare. However, we needed insurance. We were able get onto ACA Bronze by keeping MAGI low. Our premium is $150 a month. Subsidy covers $1500 month. It’s kind of embarrassing.
Long story.
I needed ankle replacement surgery 11 years ago (yes they do that). Eventually, I wore the joint out and had to have another joint replacement. Total cost was $120K. My cost was $5K. Insurance covered the balance. I am very thankful.
Remember our net worth is $4 million. I don’t make the rules, just follow them.
The rules of the world are a mystery to me. We support several faith based charities as a way to give back.
Truly I was prepared to cover the surgery cost out of pocket. Maybe I should have. However, we paid lots of taxes along the way. So I don’t feel bad for exploiting the opportunity.

Just saying, if you are trying to FIRE, there are ways to afford quality healthcare.
I am posting this as a service to all. Glad I’m anonymous.

Forever thankful

@Gallaher Thanks for the post, it's great that you get the care you need.

What I read in your post is that the U.S. healthcare system is a train wreck. The marketing spending comment, and the "cost" of the ankle procedure vs what you and insurance both paid is silliness, in a financial and business sense.

Example of U.S. healthcare pricing and consumer pay:
Seller (provider): price is $1 million, but for you a special deal. $10 today.

Buyer (consumer): OK, $10 it is.

Insurer pays $9,999,990.

Adding to the nonsensical and opaque pricing models is the colossal waste expended at every step of the healthcare chain. Office workers, providers, insurers - the country's needs can be met with 25% of the cost currently spent.

Choose any industrialized nation as a benchmark, the U.S. is an embarrassing data point by comparison. This statement applies to financial as well as health outcome comparisons.

The U.S. healthcare system is broken. Utterly.

 

[Gallaher]

@Gallaher Thanks for the post, it's great that you get the care you need.

What I read in your post is that the U.S. healthcare system is a train wreck. The marketing spending comment, and the "cost" of the ankle procedure vs what you and insurance both paid is silliness, in a financial and business sense.

Example of U.S. healthcare pricing and consumer pay:
Seller (provider): price is $1 million, but for you a special deal. $10 today.

Buyer (consumer): OK, $10 it is.

Insurer pays $9,999,990.

Adding to the nonsensical and opaque pricing models is the colossal waste expended at every step of the healthcare chain. Office workers, providers, insurers - the country's needs can be met with 25% of the cost currently spent.

Choose any industrialized nation as a benchmark, the U.S. is an embarrassing data point by comparison. This statement applies to financial as well as health outcome comparisons.

The U.S. healthcare system is broken. Utterly.

Chassis,
It’s worse than that. Had I paid cash for the procedure, I have no bargaining power. Not like the insurance company.
The price for the procedure was $120K. I don’t think the insurance company actually paid that amount. They paid a negotiated rate that I could not get....even for cash.
I believe the greatest driver of cost in the US is liability.
However, the care I received was very high quality.

 

[cat4ever]

Even from those that feel no guilt, I sense a feeling that there may be an appearance of unfairness in receiving subsidies while maintaining a high net worth, which if so I don't understand. The way I see it is, why should you be penalized with reduced subsidies for living within and below your means in order to build a nice nest egg while you did have an income? Did you really do that to have the privilege of paying way more for health insurance than those that didn't save?

 

[Teacher Terry]

Although I personally never benefited from the ACA it’s existence is so important because people that couldn’t find employment with HI have been financially devastated. Health Insurance shouldn’t be tied to jobs.

 

[Gallaher]

I recommend you research how Medicare is funded.

Jimbee, I accepted your suggestion and researched how Medicare is funded:

Straight from the Medicare.gov site:

The money in the Medicare Trust Funds comes from a variety of sources:
The Medicare tax, a payroll tax paid by employers and employees
General federal tax revenue, as appropriated by Congress
Income taxes paid on Social Security benefits
Premiums paid by Medicare beneficiaries
Interest earned on the trust fund investments


I was correct, it’s basically taxes. Also, premiums and interest.
However, the interest is accrued from taxes paid to the Medicare Trust Fund.

Did you think otherwise?

 

[Gallaher]

Although I personally never benefited from the ACA it’s existence is so important because people that couldn’t find employment with HI have been financially devastated. Health Insurance shouldn’t be tied to jobs.

Very true! Health insurance related to jobs is a holdover from World War II. Because the government instilled wage controls, Kaiser Shipyards could not offer raises but they could offer health care.
No one thinks of Kaiser as anything but healthcare. They actually were shipbuilders, aluminum, steel manufacturers before they morphed into healthcare. Guess they followed the money.